Respondents at a sample of retail stores in the Eleventh Federal Reserve District expect business activity to pick up moderately over the next six months. Relatively few, however, were even mildly optimistic about improvement in the employment picture in their areas for the near term. Recent sales at these stores were somewhat greater than during the comparable period last year, with summer sales being greater than anticipated. Nevertheless, inventories are still higher than this time last year and a little higher than some would like. Virtually all indicated that wholesale prices for inventories, as well as retail prices they charge their customers, have risen moderately over the last six months. Moreover, nearly all anticipate that both wholesale and retail prices of their goods will rise by about a like amount in the next six months.

About two-thirds of the respondents reported that sales recently were above those a year ago, with a few indicating that the increase has been substantial. The increase was attributed by most to greater demand, improved internal operations, and expanded facilities. On balance, the importance of "big ticket" items and the most expensive "top of the line" items in total sales has not changed materially since a year ago. At least at these outlets, the consumer apparently has not become more economy-minded in past months.

All of the stores surveyed ran special summer sales. A little over 60 percent indicated that the sales volume exceeded their expectations and was greater than during the summer sales last year. Most respondents indicated that the number of items on sale and the price reductions this year were comparable with those last year, although about 30 percent reported greater number of items and larger price reductions in this year's sales.

Even though sales have been up recently, almost 80 percent have inventories equal to or greater than those a year ago. Moreover, just more than a third of the respondents felt that their current inventory levels are a little too high. Nevertheless, all of the respondents are planning to keep their inventories at present levels or actually increase them slightly over the next six months (exclusive of changes for seasonal reasons). A few pointed out, however, that anticipated increases in inventories will probably reflect higher prices rather than greater unit volume.

Regarding price increases, nearly all of the respondents experienced a moderate rise in wholesale prices of inventories over the last six months. Moreover, the majority indicated that salaries in their stores have risen from 5 to 10 percent during the last year; and, on balance, the number of people employed has also risen over this period.

In light of these increased costs, almost 90 percent of the stores surveyed have raised their retail prices in recent months. And in view of the near unanimous feeling that wholesale prices will continue to rise about as rapidly in the next six months as in the last six months, most respondents are planning to increase retail prices of their goods moderately further in the near term.

District data continue to show a modest recovery in economic activity. Total nonagricultural wage and salary employment in the District states rose 0.2 percent in June above the May level. Most of the growth came in manufacturing—an employment area that still lags behind year-ago levels. Car registrations in the four major reporting areas in Texas showed a sharp 21 percent gain for June and are running much stronger than a year ago. Similarly, department store sales continue to show strength in consumer buying. The seasonally adjusted Texas industrial production index dropped slightly in June mainly due to a cut in crude production. Texas crude production allowables were reduced to 66.2 percent for August, the fourth consecutive month of such reductions. Recent rains have broken the drought, and progress is being made in efforts to control the outbreak of Venezuelan equine encephalomyelitis.